Dublin is cause of dairy woes

THE time has come for the Government to cut the dairy industry some slack. Even as Brussels pumps money into supporting the dairy market, to keep farmers’ heads above water, Dublin has dragged them down, with payment delays, budget cuts, and our national credit crisis.

Nor has nature done any favours, with a cold, wet spring making it hugely challenging to make the most of Ireland’s relatively cheap grass feeding.

Absolutely nothing can be done about the weather, other than adjust as well as possible, but the Government can throw frozen-out and waterlogged milk producers a lifeline by making an early decision on how it will distribute available EU funding.

ICMSA president Jackie Cahill has identified a possible fund of €64m from which the Government could help dairy farmers over the next 12 months.

Up to €30m is likely to become available later this year, earmarked for dairy and rural broadband. In Germany, the government has already reserved this funding for dairy farmers, said Mr Cahill.

Next year, €17m will be available from the modulation funds, and €17m can be allocated in 2010 from unused Irish CAP funding.

Now is the time to give dairy farmers a shot in the arm by promising them a considerable share of these funds.

Otherwise, the promising future of a quota-free Irish dairy industry is endangered – and many Irish milk producers will not survive to reap the benefits of the EU’s huge expenditure in buying 130,000 tonnes of butter into APS and intervention, and 120,000 tonnes of skim milk powder into intervention.

The EU’s market support has been backed up by Irish co-operatives subsidising the milk price.

For example, Dairygold Co-op has paid out €20m to farmers in 2008 to compensate for low milk prices. But group chairman, Vincent Buckley, has warned it cannot sustain this in 2009, against a background of severe global economic downturn. Also last week, Carbery Group chief Dan McSweeney said EU supports are insufficient, and production cutbacks looked inevitable if farmers cannot get a “sensible income” from milk.

In other words, dairy farmers could be forced out of business.

That should be all the warning the Government needs that the dairy industry cannot take more punishment.

By delaying Farm Waste Management and REPS 4 payments, and cutting other payments to farmers in its twice yearly budgets, the Government has pushed dairy farmers to the brink. Its economic mismanagement exacerbated Ireland’s version of the credit crisis, which hits dairy farming on the double.

After their biggest ever annual investment in 2008, in order to obey Government regulations such as the nitrates directive, the tighter control of credit by bankers, suppliers and merchants is as much as many farmers can bear. And the dairy industry’s funding requirements at processor level are also threatened by very tough banking constraints.

However, by announcing aid for the dairy industry without delay, the Government could help to nurture the green shoots shooting up after a year of dairy deep freeze. There are signs that Irish dairy farmers who stuck it out can begin to benefit from those who fallen by the wayside in other countries.

Just across the water, Claymore Dairy, in the north of Scotland, are losing three of its remaining producers, including its largest, with 300 cows. This will leave the co-op with only 11 producers in an area the size of Belgium.

Production in the EU and the US is falling in response to low prices and low profitability.

Glanbia reports reduced milk output in places like France and the US – which is why the group has decided to sustain the manufacturing milk price at the cost of losses for its Food Ingredients Ireland division, and to make a three-year loan of €8m available to its milk suppliers.

Management at the Kilkenny-based group believe that dairy markets have reached the bottom, and there will be some recovery in late 2009.

They say sustaining the milk price is important in the current, unprecedented circumstances, to help maintain Glanbia’s Irish dairy supply and trading base.

IFA also says there is evidence of a market turnaround, but it has yet to lift above an intervention price equivalent for farmers, and was unlikely to come in time to significantly improve average Irish milk prices in 2009.

It certainly won’t be in time for the peak milk supply later this month.

The €64m which ICMSA says could be available would be worth 1.14 cent per litre to farmers over the next 12 months.

Even a fraction of it could convince dairy farmers that they have a future worth planning for.